‘You Don’t Kill a Story by Killing a Journalist’
Three years ago today, Corinne Vella received a call that would forever change her family, her life, and even her homeland, the small Mediterranean island of Malta.
Sergei Roldugin’s mastery of the cello isn’t what made him globally famous.
Media outlets worldwide illuminated the Russian musician’s finances when the Panama Papers investigation revealed that he was behind a network of offshore companies worth hundreds of millions of dollars. Now, a new leak of over 1.3 million banking transactions and other documents has identified additional financial manipulations that further benefited two companies Roldugin is associated with.
Such wealth is inexplicable for a Russian classical musician, even one honored with the title of People’s Artist of Russia, as Roldugin has been. The revelations about Roldugin’s money have piqued public interest because the cellist is known to be a close friend of President Vladimir Putin — and because each of the companies Roldugin was linked to in the Panama Papers investigation were set up and managed by Rossiya Bank, an institution known in Russian media as “Putin’s bank.”
Published in April 2016, the Panama Papers were one of the biggest leaks in journalistic history, revealing secretive offshore companies that were used to hide wealth, evade taxes, and commit fraud by dictators, criminals, and business tycoons.
The documents on which the stories were based were obtained from the Panamanian law firm Mossack Fonseca. The documents were received by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists (ICIJ) with OCCRP.
The new revelations show two Roldugin-linked companies received at least US$69 million from 2008 through 2010 from a system of at least 75 offshore entities OCCRP has dubbed the Troika Laundromat.
The cellist’s companies did business with at least four shell companies that were part of the Laundromat. That operation functioned from 2006 to early 2013 and took in $4.6 billion. The system was used for many purposes, including moving money out of Russia, money laundering, hiding assets, evading taxes, and more. (It is named after the Russian investment bank Troika Dialog, which created and operated the network to benefit Russia’s elite.)
The Roldugin companies that received the money were Sandalwood Continental Ltd., based in the British Virgin Islands, and International Media Overseas SA (IMO), based in Panama. Roldugin controlled IMO, while Sandalwood belonged to Oleg Gordin, a St. Petersburg businessman who has acted as Roldugin’s authorized representative in other companies.
About $57.6 million of the total Sandalwood and IMO received from the Laundromat came from payments described as purchase and sale agreements of shares. The remaining $11.6 million was paid by Troika Laundromat companies after they cancelled stock deals with Sandalwood and IMO 16 consecutive times in what appear to be a series of arrangements that served as excuses to funnel money to Roldugin.
Ruben Vardanyan, who headed Troika Dialog at the time the companies it created were wiring money to Roldugin’s companies, says he was unaware of any of this.
“I know there is such a musician, but I never had any dealings with him,” Vardanyan said in an interview with OCCRP. “Why was he receiving money from Troika Dialog companies? I don’t know anything about it.” Vardanyan is not accused of any crimes.
All the transactions were executed through Ukio Bankas in Lithuania, where about half the Troika Laundromat companies are known to have held accounts. Lithuanian regulators shut Ukio in 2013, alleging poor asset quality and compliance. The bank’s principal shareholder, Vladimir Romanov, absconded to Russia. In 2014, the Russian government officially refused to extradite the banker to Lithuania. That left Lithuanian investigators grasping to recoup millions they believe he stole. (Romanov didn’t respond to requests for comment. Edita Karpaviciene, the former chairwoman of Ukio’s supervisory council, declined to comment.)
There are reasons to question why the millions of dollars were paid to Roldugin’s company accounts.
Over just 10 days in late July 2010, each of the companies — Sandalwood and IMO — signed eight contracts to buy shares in the Moscow-based energy giant Rosneft from two Laundromat companies. (Sandalwood dealt with Starcourt Worldwide, IMO with Dino SA.)
Then, in August, each of the 16 deals was cancelled by Starcourt and Dino. This triggered the contracts’ cancellation clauses, requiring the Laundromat companies to pay IMO and Sandalwood 16 separate penalties for reneging.
The contracts all contained identical termination clauses that set the cancellation fee at an amount based on market rates. Each cancellation netted Roldugin-affiliated companies between $645,050 and $797,700, for a total of exactly $11.6 million.
Roldugin’s companies profited without actually buying or selling a single Rosneft share.
Roldugin didn’t respond to a telephone message or an email request for comment sent to the St. Petersburg House of Music, where he serves as the artistic director.
In 2016 when his connection to the Panama Papers investigation was revealed, the cellist told Russian media that millions went to expensive instruments that he and other talented young musicians played.
The origin and true purpose of the $11.6 million transfers uncovered in the Laundromat data remains unknown, though testimony from a former Ukio employee found among the leaked banking transactions sheds light on why the decision may have been made to split the payments up this way.
According to the employee, the bank’s compliance department reviewed transactions of more than $1 million. The money to Roldugin’s companies was divided into 16 separate payments, all less than the amount that would have triggered scrutiny.
Vitas Vasiliauskas, chairman of the board of the Lithuanian central bank, said the Roldugin transactions were suspicious and should have been halted and reported to Lithuanian authorities.
“The bank’s employees working in the field of preventing money laundering should have halted these operations,” Vasiliauskas told OCCRP.
“And even more, there was always an obligation – even in those times – to inform the competent authority,” he said. “In this case, it should have been the Financial Crime Investigation Service.”
Leaked emails from Ukio’s compliance department show that it did inquire into at least one Roldugin-related transaction at the request of a correspondent bank. In the emails, Ukio’s compliance officer seemed confused.
“To be honest, I can’t really understand what’s going on,” Egle Petrauskiene, head of the bank’s anti-money laundering division, wrote to her colleagues in October 2010.
“What is the essence of this transaction?” she asked a colleague, referencing activity involving Dino and IMO. A former employee of Ukio’s compliance department who participated in these email conversations declined to comment for this story.
By this point, the money had already left Ukio’s accounts and there is no evidence the transfer was ever reversed.
In addition to the $11.6 million in bogus termination payments, the Roldugin connected companies received another $57.6 million from Laundromat companies. All the payments were based on share transfer agreements, most involving Rosneft stock.
In all the cases, the deals yielded a profit for the Roldugin-affiliated companies. This pattern matched that seen by the same companies in the Panama Papers data. In both cases, it’s unclear if they ever really owned the shares they were buying or selling.
At the time, reporters from the Swiss newspaper Sonntagszeitung showed documents from these deals to Mark Pieth, Professor of Criminal Law and Criminology at the University of Basel and a former member of the Financial Action Task Force on Money Laundering.
“These Transactions are highly suspicious. They should raise every red flag possible for a bank. Especially if there are Russian parties involved and even more so, if one of them is a close friend of President Putin,” he said.
Additional reporting by Olesya Shmagun